Call to Order and Roll Call
The5th meeting of the Interim Joint Committee on Transportation was held on<Day> Tuesday, October 4, 2016, at 1:00 PM, in Room 171 of the Capitol Annex. Representative Hubert Collins, Chair, called the meeting to order, and the secretary called the roll. The minutes from the Committee’s September 6, 2016 meeting were approved.
Members:Senator Ernie Harris, Co-Chair; Representative Hubert Collins, Co-Chair; Senators Jared Carpenter, C.B. Embry Jr., Gerald A. Neal, Albert Robinson, Brandon Smith, Johnny Ray Turner, and Mike Wilson; Representatives Leslie Combs, Tim Couch, Donna Mayfield, Tom McKee, Charles Miller, Jerry T. Miller, Terry Mills, Marie Rader, Sal Santoro, John Short, Arnold Simpson, Jim Stewart III, Tommy Turner, and Addia Wuchner.
Senator Dorsey Ridley and Representative David Watkins attended the meeting via videoconference.
Guests: John-Mark Hack, Commissioner, Department of Vehicle Regulation, Kentucky Transportation Cabinet; Kevin Pula, Policy Specialist, National Conference of State Legislatures
Update on REAL ID and Status of Kentucky’s Request for Extension
John Mark Hack, Commissioner, Department of Vehicle Regulation, Kentucky Transportation Cabinet, testified about REAL ID and Kentucky’s request for an extension to be in compliance with the REAL ID Act. Commissioner Hack stated that 25 states or territories are compliant with the REAL ID program and 31 states or territories are non-compliant or have extensions that expire October 10, 2016. Kentucky requested an additional extension August 31, 2016, and a revised extension on September 30, 2016. A copy of that extension request was provided to the committee. Kentucky is compliant with most REAL ID provisions. Commissioner Hack provided a handout indicating the provisions with which Kentucky is compliant.
Kentucky is in compliance with several requirements of the REAL ID regulations. The state requires non-U.S. citizens who apply for a driver’s license to use a different location to apply for the license than the location used by other citizens in order to allow the cabinet to verify their identity and current immigration status. Kentucky does not grant driver’s licenses or identification cards to non-U.S. citizens who are in the country without lawful immigration status. The physical card that Kentucky uses for a driver’s license and an identification card has the security features required by the REAL ID law and regulations. Commissioner Hack stated the only feature that Kentucky licenses and ID cards lack is the distinguishing mark between the REAL ID compliant credential and a non-compliant credential. That feature is not available because a duel system has not been established.
Commissioner Hack stated a Department of Homeland Security (DHS) requirement for an extension is that a territory or state must demonstrate substantial progress toward enhancing the security of the ID credentials. He highlighted four areas where he feels Kentucky has made such progress.
With respect to section 37.25 (a) (2) of the regulations, which requires reverification of an applicant’s social security number and lawful status prior to ID issuance, the Commonwealth uses Social Security Online Verification Program (SSOLVE) and Systematic Alien Verification for Entitlements Program (SAVE) systems to re-verify the applicant’s social security number and lawful status.
With respect to section 37.29 of the regulations, which does not permit an individual to hold more than one REAL ID document and no more than one driver’s license, KRS 186.412 (16) prohibits any person from having more than one driver’s license. The Kentucky driver’s license application requires all applicants to attest, under applicable state and federal criminal and civil penalties, that they do not currently have a license or identification card from another state or jurisdiction. If the applicant holds a credential from another state or jurisdiction, he or she is required to submit either a clearance letter from that state or jurisdiction, or surrender the driver’s license or ID credential issued by the other state or jurisdiction. Commissioner Hack stated he is aware of at least two REAL ID compliant states that employ a comparable system. The Problem Driver Pointer System (PDPS) is also utilized to identify drivers under current suspension by another state or jurisdiction. The Commercial Driver License Information System (CDLIS) is utilized to determine if CDL applicants hold a CDL issued by another state or jurisdiction. In addition, KYTC is actively investigating the requirements, including necessary resource allocations and operational changes, to join the State-to-State (S2S) Verification System to further enhance the security of credential issuance. Depending on the financial resources necessary to modify Kentucky’s current information technology systems, a legislative appropriation may be necessary for the Commonwealth’s S2S participation.
Section 37.41 of the regulations indicates that compliance involves having a documented security plan for the Department of Motor Vehicle (DMV) operations. Commissioner Hack stated this security plan will be enabled by legislative authority to develop a central issuance system for driver’s licenses and IDs, which the cabinet plans to request from the Kentucky General Assembly during the 2017 Session. Kentucky’s documented security plan will be included in the Certification Package per section 37.55.
The state also must have protections that ensure the security of personally identifiable information. As part of the central issuance system described above, KYTC plans to implement a “scan and capture” system to secure social security numbers and birth certificate information of those citizens voluntarily applying for a REAL ID, compliant driver’s license, or ID. The ability to implement this process is contingent on legislative approval of the request to transition to a central issuance system, a request the cabinet anticipates making during the next legislative session.
Commissioner Hack highlighted areas that will still need to be addressed with respect to section 37.41(b)(4), which requires states to implement documented procedures for controlling access to facilities and systems involved in the enrollment, manufacture, production and issuance of driver’s licenses or IDs. Kentucky’s full compliance with this provision is also dependent on a transition to a central issuance system. If the request is granted, the documented procedures will be included in the documented security plan for operations per section 37.41.
One provision that Kentucky is working towards is ensuring the physical security of the locations where driver’s licenses and identification cards are manufactured or produced, as well as the security of document materials and papers of which such cards are produced. Kentucky’s contract with the driver’s license and ID credential manufacturing vendor expires in January 2017. Because of the timing of the administration transition and the requirements of Kentucky’s state procurement code, the cabinet plans to request a one-year extension of the contract. During this one-year extension, KYTC intends to develop a request for proposals from driver’s license and ID manufacturers that will include a condition for consideration of full compliance with this provision. Kentucky’s full compliance with this provision is contingent upon legislative approval of the request to become a central issuance state.
Kentucky also must conduct name-based and fingerprint-based criminal history and employment eligibility checks on employees in covered positions or have an alternative procedure approved by DHS. Commissioner Hack stated that, in a new central issuance system that is contingent on legislative approval, a fully compliant background check system will be developed and implemented for new employees. KYTC intends to partner with the Kentucky Administrative Office of the Courts to develop a fully compliant background check system for current employees in covered positions.
Kentucky must also submit a final certification package that will be submitted after compliance of all outstanding provisions has been achieved. If the state chooses to issue both compliant and noncompliant documents, it must be clearly be stated as such on the face of the noncompliant document and in the machine readable zone that the card. The card must also incorporate a unique design or color indicator that clearly distinguishes them from compliant licenses and identification cards. Commissioner Hack stated that, under a new central issuance system, Kentucky intends to offer noncompliant documents and to make their issuance strictly voluntary. A system will be developed that produces credentials that are clearly distinguishable as noncompliant or compliant through unique designs, a color indicator, or a combination of the two.
Commissioner Hack stated that, if the extension for Kentucky to become REAL ID compliant is granted, it will allow an additional 12 months for continued progress toward modernizing a Kentucky’s driver’s license issuance system and enhancing its security. If the extension is not granted by October 10, 2016 or renewed at a later date, cumulate enforcement measures will remain in effect through successive phases. As of October 11, 2016, Kentucky driver’s licenses or IDs will not be accepted at DHS’s Nebraska Avenue Complex (NAC) headquarters. If the extension is not granted as of January 10, 2017, Kentucky’s driver’s licenses or IDs may not be accepted at some federal facilities, including military installations and all nuclear power plants. As of January 22, 2018, Kentucky driver’s licenses or IDs will not be acceptable for boarding federally regulated commercial aircraft for domestic flights if the extension is not granted or later renewed.
Commissioner Hack stated that access needed for activities directly relating to safety and health or life preserving services, to law enforcement, and to constitutionally protected activities, including legal and investigative proceedings, will not be affected, including access to the social security administration, veteran’s affairs, and federal court houses. Individuals not required to present identification where it is not currently required to be presented, such as the use of identification needed to gain access to a federal facility like the public areas of the Smithsonian or national parks will also not be affected. Federal agencies may accept other forms of identification documents such as a U.S. passport or passport card. Prohibitions do not affect other uses of driver’s licenses or identification cards including licenses and cards from noncompliant states that are unrelated to official purposes as defined in the REAL ID Act, including voting, registering to vote, or applying for or receiving federal benefits.
In response to a question asked by Representative Short concerning the major issues Governor Bevin had with 2016 SB 245, Commissioner Hack stated that Governor Bevin heard more constituent outcry of concern on the REAL ID Act and SB 245 than any other bill. Due to the Governor’s newly elected status, as well as trying to enact a budget plan, Governor Bevin felt it necessary to reevaluate the provisions involved in SB 245 and therefore was unable to sign the bill. Commissioner Hack stated there were concerns documented by the American Civil Liberties Union (ACLU) as well as Take Back Kentucky and several other organizations. He said he cannot speak for any organization that voiced concerns but that there were some concerns on the understanding and implications of the federal law that were not necessarily accurate. Governor Bevin stated in his SB 245 veto message that he would like to take a proactive approach to communicate with those stakeholders in a transparent way about those provisions.
In response to a question asked by Representative Short concerning the suggested changes to SB 245 for consideration during the 2017 Regular Session, Commissioner Hack stated he is unprepared to go through a list of changes but would welcome the opportunity to do so at a future date. He said there are several provisions of the bill that represent great improvements to the system of issuance and how business is conducted in the Department of Vehicle Regulation.
In response to a question asked by Representative Jerry Miller concerning the issue of homeless Kentuckians having difficulty obtaining driver’s licenses or IDs due to the lack of a permanent address, Commissioner Hack stated a memorandum was sent that stated homeless shelter and halfway house addresses should be acceptable forms of addresses in order for a citizen to obtain a driver’s license or and ID.
Representative Combs voiced her concern over the SB 245 veto given that the cabinet and all necessary parties were involved in the drafting of the bill, and the bill was public knowledge. She asked whether, if the extension is not granted and legislation were passed at the beginning of 2017, it would be acceptable to DHS to consider Kentucky REAL ID compliant. Commissioner Hack stated there are no DHS provision prohibiting it from granting an extension after denial of a previous request. He said he cannot speak for DHS but that he feels that, if Kentucky is compliant with the provisions through legislation, it would be acceptable.
Co-Chair Harris stated that, as the sponsor of SB 245, he received numerous letters and emails voicing concerns about REAL ID and he believes those correspondences are mostly due to citizens being uninformed about REAL ID. He reiterated that REAL ID had been discussed by the General Assembly with various open meetings for at least two years, and that the bill’s drafter had been in constant contact with KYTC to discuss the issues. Co-Chair Harris suggested a possible Transportation Committee meeting within the three week break of the 2017 Session to educate citizens on REAL ID.
Commissioner Hack stated that, in the context of convening stakeholders communicating about SB 245, he is accountable to Governor Bevin, to the legislature, and the people of the Commonwealth. He added he cannot speak on what was done within the previous administration, but he vowed to convene the stakeholders and said that the perspectives of everyone will be considered in a collaborative effort.
Representative Jerry Miller stated that the ACLU had concerns about SB 245 involving 4th amendment rights and privacy issues. Constituents felt that SB 245 provided a false sense of security, that it was an overreach of the federal government, and that the costs associated with implementing SB 245 and the REAL ID Act were too high. Representative Jerry Miller stated that he saw no need to provide non-citizens with a REAL ID even if they were in the country legally. He said he does not believe the bill was fully debated by the General Assembly due to the late hour passage of the bill and it not being fully debated on the floor of the House of Representatives. Amendments were filed that were not germane and two amendments were filed that were not debated fully as well.
NCSL Presentation on Motor Fuels Taxes and Their Long-Term Sustainability, including Alternatives being Explored in Other States
Kevin Pula, Policy Specialist, National Conference of State Legislatures (NCSL), testified on issues pertaining to motor fuels taxes and alternatives being explored in other states. Mr. Pula moderated a session titled “Gearing Up, Transportation Funding for the Future” at the NCSL conference in August. Over 120 session attendees, including legislators, legislative staffers, stakeholders and private sector individuals, were asked for the three most pressing transportation issues in their states. The answers varied, but money, maintenance, funding, and congestion were among the most common responses. The attendees were asked about transportation as a legislative priority. Eighty-six percent said that transportation is either in the top five or the number one issue.
A chart from the American Society of Civil Engineers 2013 Infrastructure Report Card showed Kentucky’s rank in comparison to surrounding states on several issues. Kentucky ranks in the 7th percentile on major roads in poor condition, while Illinois and Ohio rank in the 15th percentile. The lowest ranking states were Tennessee and Virginia at the 6th percentile. Kentucky ranked at 8.7 percent in structurally deficient bridges, compared to the highest ranking of West Virginia of 13.2 percent and the lowest ranking of 5.8 percent in Tennessee. For functionally obsolete bridges, Kentucky had the highest percentile at 22.7 percent and Illinois had the lowest percentile of functionally obsolete bridges at 7.4 percent. Kentucky’s estimated costs to motorists were $315.11 per year compared to West Virginia’s highest costs of $469.23 per year and Tennessee at the lowest at a cost of $225.34 per year.
Mr. Pula provided a chart that highlighted statistics and trends in transportation that reiterate the importance of states in the transportation arena. In all levels of government that fund highways and transit, the average annual own-source spending by level of government is 25 percent, funding by federal government at an estimated $54 billion, 40 percent funding by state funds at $84 billion, and the remaining 35 percent of funding coming from local entities at approximately $75 billion. Mr. Pula stated that surface transportation investment has been declining since 2002. State spending has decreased by approximately 15 percent, and overall spending has decreased by 12 percent in 2012 dollars. The Congressional Budget Office has evaluated the spending levels since 2003 and found that, even while nominal spending was at 44 percent on transportation funding, real spending on specific price indexes of infrastructure has fallen by 9 percent.
Mr. Pula stated that 56 percent of all transportation spending is on new capacities or expansion. States are spending nearly 60 percent of their dollars on operations and maintenance and 40 percent on expansion. Federal dollars have been applied toward expansion or capital programs at 95 percent. These figures were also evaluated by the American Association of State Highway and Transportation Officials (AASHTO), which estimates that state DOTs spend approximately 71 percent of funds on system preservation and 29 percent on expansion.
Mr. Pula said that the 2015 Fixing America’s Surface Transportation (FAST) Act is a $305 billion, 5-year reauthorization of the federal program. There was a 5 percent funding increase in 2015. The increase will grow to 15 percent for highways by 2020. There was an 8 percent increase for transit funding in 2015 that will grow to 18 percent. The short term spending bill that Congress passed through December 9, 2016 included pre-FAST Act numbers. The FAST Act provided no new user-based revenues for the Highway Trust Fund. The Congressional Budget Office estimated that, by the end of term for this bill, there will be a $70 billion shortfall between federal gas tax revenues and what is being authorized in federal government spending. Congress therefore identified “pay-fors” which included $53.3 billion from the Federal Reserve Surplus Account, $6.9 billion in reduced Federal Reserve Stock Dividend payments, and $6.2 billion from sale of Strategic Petroleum Reserve.
The FAST Act provides changes to federal programs including a $2 billion increase to the Surface Transportation Block Grant Program by 2020 and a percentage split adjustment. There will also be lowered project size requirements and an increased share going to rural projects for the Transportation Infrastructure Financing and Investment Act. Funding of alternative grants will be funded at $95 million in competitive grants and mileage-based user fee pilots.
Mr. Pula stated that, according to the NCSL/AASHTO 2011 Transportation Governance and Finance Report, over 50 different mechanisms were found that could be used for funding transportation, including such mechanisms as fuel taxes, several other types of taxes and fees, and private contributions. Federal and state governments rely heavily on gas tax revenue to fund highways. A motor fuel tax structure chart was provided for reference and comparison between fixed cent-per gallon and variable indexing structures. Since 1993, there has been a decreasing value of state gas taxes until 2011 where a slight increase was realized. Only 13 states have raised their gas taxes by more than 10 cents per gallon since 1993. Fifteen states have not raised the gas tax in over 20 years. Motor fuel tax revenues account for 1.6 percent (2011 number) of total state and local general revenues, down from 2.3 percent in 1993. The small increases that have been seen have lagged behind growing funding needs. The goal is to increase the Corporate Average Fuel Economy (CAFE) standards to 54.5 miles per gallon by 2025, an increase of nearly 70 percent since 2012. Fully realizing these efficiencies would further erode fuel tax revenues.
As many as 33 states have considered legislation related to state gas taxes in 2016. About half of the legislation would explicitly increase the state tax rate. To date, there has not been any legislature that has approved a gas tax increase in 2016. Eighteen states and the Washington D.C. have enacted legislation since 2013 to increase their gas taxes. Of those eighteen states, there does not appear to be a strong demographic, regional, or political trend. In 2015, Georgia, Idaho, Iowa, Nebraska, South Dakota, Utah, and Washington enacted gas tax increases. The increases for each state range from 6 cents per gallon to 11.9 cents per gallon, a percentage increase of anywhere from 28 percent to 53 percent increase. Kentucky’s motor fuels tax provides for 56 percent of state user revenues for state and local roads.
Mr. Pula stated 19 states, representing 54 percent of the U.S. population, now index their state motor fuels tax. In 2013, Massachusetts (later repealed), Maryland, Pennsylvania, Virginia, Vermont, and Washington D.C. all enacted legislation to index their motor fuels tax aggressively. Wyoming chose to keep a fixed structure in 2013. In 2014, three states mildly indexed their motor fuels tax. Rhode Island decided to index but with no immediate increase, New Hampshire enacted a fixed increase based on CPI trends and Massachusetts voters repealed the 2013 indexing measure. In 2015, Georgia adjusted their motor fuels tax by using CPI and CAFE standards, Michigan used inflation, North Carolina used population and CPI standards, and Utah utilized a percentage of retail tax. All of those states chose to index. Idaho, Iowa, Nebraska, South Dakota, and Washington chose to use fixed increases. Kentucky adjusted a percentage on wholesale tax to implement a price floor and limit losses. When asked how states have successfully implemented indexing, several states responded that they demonstrated the need and the proper use of revenues for improved transportation infrastructure. Mr. Pula added there has been a trend for states to utilize lockbox legislation, where the money that is raised for transportation revenues are dedicated either constitutionally or statutorily to transportation funding only as to not allow any diversions.
Mr. Pula stated there have been several states that have implemented non-gas tax options. In 2016, Alabama restructured allocation mechanisms, meanwhile their funding bill is currently being considered. Also in 2016, Indiana arranged for budget reserve transfers and a local wheel tax. Nebraska implemented a gas tax increase in 2015 and in 2016 created a fund to manage new revenues. South Carolina moved $200 million of various transportation fees from the General Fund to the Transportation Trust Fund and the State Infrastructure Bank restructure to allow up to $2.2 billion in bonds. Rhode Island instituted a commercial vehicle only toll and the use of GARVEE bonds. In 2015, Connecticut utilized $2.8 billion in bonding as a non-gas tax option. Georgia, Idaho, Michigan, and Wyoming all implemented electric vehicle fees. Also in 2015, Delaware increased various DMV fees and taxes, Georgia added a hotel and local option tax, Michigan implemented general fund transfers and various fee increases, Massachusetts utilized $200 million in bonding, North Dakota utilized oil and gas tax revenue, and Texas utilized an oil and gas severance tax.
Mr. Pula said that, in reference to electric vehicle fees, Georgia’s fee is highest at $200 per fee. Idaho and Michigan impose fees on hybrid vehicles. He provided a chart that broke down the national fraction, percentage of vehicles in the state, and the estimated number of personal electric vehicles registered per month for ten states that impose electric vehicle fees. Also included in the chart was each of the ten states and their estimated annual revenue acquired from the electric vehicle fees. Mr. Pula stated there are currently 45 states that levy a cent per gallon tax on alternative fuels. Thirteen states allow alternative fuel vehicle owners to pay a user fee in lieu of the tax. The alternative fuel tax/fee in Arizona is 4 percent of the vehicle’s value, in Arkansas it is $164, in California is $36, and in Kansas is a mileage-based user fee or a pre-paid permit.
Tolling is another system utilized throughout several states. Toll networks by mileage within a state shows that Ohio, Indiana, and Illinois, which are all neighboring states to Kentucky are within the top 10 network toll lanes in the country. Toll network revenues show that the New Jersey Turnpike Authority has the highest revenue from tolls at an estimated $1.413 billion, and the Harris County Toll Road Authority in Texas has the lowest revenue from tolls at an estimated $560 million.
Pay per mile or mileage based user fees is an option some states are reviewing. OreGo in Oregon has a pay per mile pilot that has the ability to consist of 5,000 volunteers and is the largest pilot. So far, approximately 1,000 volunteers have taken part in the pilot program, which charges 1.5 cents per mile driven, followed by a rebate from the gasoline tax on gas purchased. California has a 9-month road charge pilot that began in the summer of 2016. Washington has a steering committee to study the feasibility of the road user charge program. Illinois has a bill sponsored by Senate President Cullerton (SB 3267) which has been postponed dealing with a road user charge. Mr. Pula stated that the FAST Act, section 6020 offers $95 million in competitive grants to study mileage based user fees or road user charges. The United States Department of Transportation has supported various other small pilots.
In 2016, there was approximately $14.2 million awarded in federal grants, and eight programs funded, as well as the testing of a variety of approaches for surface transportation system funding alternative program selections. The Hawaii Department of Transportation received a nearly $4 million grant to test a user fee collection based on manual and automated odometer readings at inspection stations. The California Department of Transportation received a $750,000 grant to test a pay-at-the pump/charging station charge. Delaware, Minnesota, Missouri, Oregon, and Washington received study grants.
Transportation ballot measures for November of 2016 include proposed constitutional lockboxes in Illinois and New Jersey. In Maine the utilization of $100 million in bonds will be on the ballot, and in Nevada the indexing of local fuel taxes to inflation will be on the ballot. In 2015, ballot measures included the creation of a state infrastructure bank in Louisiana, an $85 million bond package in Maine, a large-scale transportation package in Michigan (failed), and in Texas a $2.5 billion General Fund transfer to transportation. The average percentage of approved transportation funding ballot measures from 2005 to 2015 was approximately 72 percent.
Mr. Pula stated that there are proposed gas tax increases in at least 12 states in 2016, and none have yet to pass. California’s transportation budget is being debated, and there is potential for a special session in Minnesota. He encouraged members to visit NCSL’s deep dive funding website located at http://www.ncsl.org/bookstore/state-legislatures-magazine/deep-dive-transportation-funding.aspx.
In response to a question asked by Co-Chair Harris, Mr. Pula stated he is in unsure who sets the CAFE standards but will acquire that information and supply it to the committee.
In reference to Representative McKee’s interest in alternative fuel sources, Mr. Pula stated he could provide more detailed information and connect him with a colleague at NCSL who knows more.
Representative Combs reiterated that New Jersey has proposed a gas tax increase of 23 cents per gallon. She encouraged members to remember that for future discussions.
With no further business, the meeting was adjourned at 2:21 p.m.